BofA Highlights ‘Some Positives to Consider’ Following Google’s Breakup Threat

Bank of America analysts discussed the Department of Justice’s (DOJ) proposed remedies regarding Alphabet’s (Google) alleged monopoly in search services, noting that there are “some positives to consider” despite the risks of a potential breakup.

Following the announcement, Google shares fell by 1.6%, while the S&P 500 gained 0.7%.

The DOJ’s proposal includes a wide range of measures aimed at mitigating Google’s dominance in search. These measures may involve ending exclusive agreements with partners like Apple and Samsung, imposing limits on data tracking, mandating data sharing, and potentially requiring the divestiture of significant assets such as Chrome and Android.

In a note issued on Thursday, Bank of America analysts pointed out that the aggressive nature of these measures was anticipated based on previous reports, but they also warned that this is merely the first step in a protracted legal process.

Alphabet has raised concerns regarding the DOJ’s extensive demands, emphasizing that the proposal comes at a time when competition in the search arena is intensifying, particularly with advancements in AI.

Bank of America indicated that a definitive ruling is not expected until the first half of 2025, with appeals likely prolonging the case into late 2026.

Despite the ongoing legal challenges, Bank of America sees several positives for Alphabet. They believe the company remains well-positioned in the search market, as users are likely to prefer Google even without exclusive agreements.

The analysts drew a comparison to the Microsoft case, where an initial breakup recommendation was eventually overturned, leading to a settlement. They foresee numerous developments in this ongoing case.

Furthermore, they noted that Alphabet’s counter proposals, which are due in December, could result in a more favorable outcome.

The bank also pointed out that Alphabet’s shares are trading at a discount to their breakup value, and with relatively few layoffs compared to its competitors, there is potential for earnings per share growth under the new CFO.

Overall, while challenges persist, Bank of America maintains a Buy rating on Alphabet with a price target of $206.